Buffett, Dimon and Bezos have a CEO for their health care venture

09 June, 2018, 20:40 | Author: Darnell Patrick
  • Buffett Dimon make plea to halt quarterly guidance so management can think long-term

Hedge fund Elliott Management Corp Chief Executive Paul Singer said on Thursday he agreed with billionaire investor Warren Buffett and JPMorgan Chase & Co (JPM.N) CEO Jamie Dimon that companies should move away from providing quarterly earnings guidance.

Buffett and Dimon said they are not opposed to the current practice of quarterly and annual reporting that ensures transparency.

The pressure to meet short-term estimates has contributed to a fall in the number of U.S. public companies, wrote Buffett, the chairman of Berkshire Hathaway, and Dimon, who is also the chairman of top executives' lobbying group Business Roundtable, in a Wall Street Journal article on Wednesday.

The guidance "often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability", the two powerful CEOs wrote in a commentary piece in the The Wall Street Journal. They have said the practice of telling Wall Street what to expect from earnings can distort management's priorities.

Dimon said companies might forego investments they should make in their business, such as marketing, hiring or research, in order to hit short-term goals. Around that time, big companies like Coca Cola, UPS and AT&T said they would no longer give quarterly guidance. Buffett has echoed the idea that guidance can lead to corporate misbehaviour.


Buffett and Dimon also blamed the practice for contributing to the decline in the number of public companies in the US over the past 20 years. Bloomberg LP, the parent of Bloomberg News, is a member of the Boston-based non-profit group.

Dimon said that Schultz "would be a great chief executive or governor or senator or mayor or whatever he wants to do", but added that he's not sure that managing a business makes a person suitable for politics.

"I've never seen a company whose performance has improved by having some forecast out there by the CEO that we're going to earn X", Buffett said.

Quarterly earnings guidance works like this. Companies including Unilever NV, Facebook Inc., GlaxoSmithKline Plc and BP Plc have scrapped the practice in favor of multi-year outlooks, according to the report.

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